In response to soaring oil prices that have rallied above US$80 a barrel, the Joe Biden administration is once again postponing the replenishment of the nation’s emergency oil reserve. The decision comes as the Department of Energy (DOE) is faced with market conditions that have made it challenging to secure a cost-effective purchase for the Strategic Petroleum Reserve (SPR).
Sources revealed to Reuters that the DOE has declined offers it received for a potential purchase. This follows a similar rejection of offers back in January when the administration first encountered difficulties in refilling the reserve.
Despite the delays, Energy Department Deputy Chief of Staff Bridget Bartol in a public statement assured that the DOE remains dedicated to its replenishment strategy for the SPR. This approach includes direct purchases when favourable deals can be secured for taxpayers, returns through exchange agreements, and canceling planned sales where drawdown is deemed unnecessary.
The urgency to refill the Strategic Petroleum Reserve arose after President Biden ordered a historic 180 million-barrel drawdown, bringing the reserve to approximately half of its capacity. This decision was taken in response to the 2022 Russian invasion of Ukraine, and it aimed to stabilise high gasoline prices.
The Biden administration had previously stated its intention to purchase crude oil when prices fell within the range of US$67 to US$72 a barrel. However, West Texas Intermediate futures have surged beyond expectations, surpassing the US$80-per-barrel mark. The price increase has been attributed to tightening supplies due to production cuts by the Organisation of Petroleum Exporting Countries (OPEC) and its allies. But despite rising interest rates, demand for oil has remained relatively robust.
